Christian Brothers auditors raised concerns about assets
Sunday, December 09, 2001
By Emily O’Reilly
The concerns were raised one year before the Christian Brothers of Ireland in Canada Incorporated (CBOIIC) went into liquidation in order to pay massive compensation bills to sexual and physical abuse victims of the Brothers. The CBOIIC liquidator has claimed that he believes some of those assets — alleged to be up to Can$100 million — may have been transferred to an Irish registered company, Richmond Newstreet.
The allegation was trenchantly denied last week by the head of the Christian Brothers worldwide, Brother Edmund Garvey. The claims were first made two weeks ago by RTE’s Prime Time programme.
Details of the auditors’ concerns are contained in internal memos circulated by Ernst & Young accountants, which have been seen by The Sunday Business Post. The memos also questioned the Brothers’ claims about the ownership of a Christian Brothers private school, Vancouver College, an issue which is still going through the Canadian courts. CBOIIC argued that the school was owned by a trust, while the liquidator argued that CBOIIC was the beneficial owner of the property.
One memo stated: “EY (Ernst & Young) has determined that there may be some significant assets which may not be recorded in the organisation’s accounts as at August 31, 1995 . . . There is an argument put forth by legal counsel that Vancouver College’s shares are not owned by the organisation but rather by 4 senior Brothers in trust for Christian Brothers of Ireland. Legal counsel differentiates between Christian Brothers of Ireland in Canada and Christian Brothers of Ireland. Professional scepticism would suggest that it is in the best interests of the organisation not to own the shares as it would protect the $4,000,000 of retained earnings in Vancouver College. There is a clear motive to circumvent the search for the actual shareholdings.”
The memo added: “EY has some concerns about the organisation’s willingness and fullest cooperation in providing all necessary and relevant information. Legal counsel expressed similar concerns in an internal memo, yet provided a professional opinion albeit unsigned.”
Last week, Brother Edmund Garvey claimed that not “a cent” of Canadian money had gone into Richmond Newstreet. He said the company had been formed as a charitable trust in 1996 to collect funds from Christian Brothers organisations worldwide to help with the Brothers’ apostolic and charitable work. “The accounts of Christian Brothers of Ireland in Canada Incorporated were annually audited by the international accounting firm, Ernst & Young, up to the time of liquidation in 1996,” said Garvey. “In these accounts, there is no reference to any transactions, separately or collectively, involving the disposal of Can$100 million, or any part of that amount . . . I therefore confirm specifically that such monies or assets could not, and therefore were not, transferred to any account in Ireland or elsewhere.”
However, The Sunday Business Post has seen correspondence between the company that manages Richmond Newstreet in Ireland, L&P Financial Services Ltd, and Brother Garvey, which proposes that Vancouver College shares be transferred to Richmond Newstreet. In a 1996 letter from L&P chairman Des Lamont, Lamont said: “Ideally, we are of the view that the ownership of the College should ultimately be transferred to Richmond Newstreet — this being the legally established corporate body which retains the resources on behalf of the General Council of the Congregation for the achievement of particular charitable objectives including the provision of education.”
Lamont then warned Garvey: “Conversely, we are concerned that any mention in legal documentation of Richmond Newstreet, which might become public in Canada in the future, might create, or focus, a target for some person or body with litigious interests.” The transfer of shares did not go ahead. However, the Canadian liquidator has stated that he is prepared to seek leave in Ireland to investigate Richmond Newstreet. Auditors to the Christian Brothers in Canada raised private concerns that all of the Brothers’ assets in that country may not have been recorded in their books.